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Social Security: Americans Agree VIDEO

Social Security: Just the Facts Video

COVERED: a week-by-week look at the political and legislative developments that led to the creation of Medicare and Medicaid 50 years ago. Bob Rosenblatt, Academy senior fellow and former Los Angeles Times Washington correspondent will report on the people and the maneuvers that led to this major expansion of social insurance.

On October 14, the Obama administration halted implementation of the new federal long-term care insurance program – the Community Living Assistance Services and Supports (CLASS) initiative, which had been tucked into health care reform legislation. It is disappointing, but not surprising that the administration was unable to design a financially self-sustaining, voluntary long-term care insurance program. The unusual legislative journey of the Patient Protection and Affordable Care Act, which had no House-Senate conference to clean up the bill, left CLASS with statutory limits that proved unworkable. Without mandatory participation or some other way of achieving near universal participation, the program did not stand a chance.

Elaine Fultz, Former director of the International Labor Organization office for Russia, Eastern Europe, and Central Asia*

In recent weeks, all but one of the Republican Presidential candidates (Jon Huntsman) have made comments favoring privatization of social security, that is, its replacement or partial replacement with privately managed individual investment accounts. This was the approach advocated by President George W. Bush, unsuccessfully, after his reelection in 2004. The candidates’ renewed interest in social security privatization is striking given the recent volatility of financial markets and the losses that Americans have incurred in their 401(k) and other private investment accounts. It is perhaps even more striking given the large body of analysis showing that privatization would disadvantage low- income workers while benefitting the wealthiest Americans. This was, for example, a key finding of the U.S.

For a long time – even before some of the current crop of presidential candidates began accusing America’s most successful public program of being nothing more than a “Ponzi scheme” – the national conversation about “fixing” Social Security has centered around cutting benefits or raising the retirement age (also a benefit cut, albeit by another name).

Rumor has it that the Joint Select Committee on Deficit Reduction, aka “supercommittee,” is considering a switch from the present Consumer Price Index (CPI) to a “chained CPI” to determine Social Security’s cost-of-living adjustment (COLA). While proponents describe the change as a “technical correction” (because the present CPI is believed to overstate the inflation experienced by average consumers), the chained CPI would understate the inflation experienced by older Americans, largely because of their relatively high out-of-pocket healthcare costs and their limited ability to make substitutions (such as fuel for food) when prices rise. Switching to a chained CPI would mean cutting Social Security benefits by gradually eroding their purchasing power – a cut that would compound over time, becoming more and more severe as beneficiaries grow older.

Shifting to a new CPI to lower future Social Security benefits is part of current debt ceiling negotiations. Some call for using the new consumer price index to make cost-of-living adjustments (COLAs) in Social Security and other federal benefits and to adjust brackets in the federal income tax code. Proponents of the new index – the chained CPI-U – describe it as a technical correction that would make the benefit adjustments more accurately reflect the cost of living experienced by average consumers. In fact, the chained CPI-U falls short of reflecting the living costs of the elderly and disabled because it does not take account of their higher out-of-pocket spending for health care. NASI has two fact sheets on this topic.

Representative Paul Ryan, chairman of the House Budget Committee, yesterday released a plan entitled Path to Prosperity that would fundamentally restructure Medicare, the program that has provided health care and financial security for America’s elderly and disabled population since 1965.

How should we evaluate proposed changes to Social Security? Whose perspective should we take when judging the strengths and weaknesses of social insurance policy? In “Views from the Stakeholders of OASDI: Employers, Workers, and Vulnerable Communities,” Session III of NASI’s 23rd annual policy research conference, four groups were represented as stakeholders of Social Security: employers, workers, children and families, and persons of color.

Alexander Hertel-Fernandez, Joint PhD Student, Harvard John F. Kennedy School of Government

The unemployment insurance (UI) system has provided an essential source of support for American workers and their families. Yet the system is not without its flaws, as panelists highlighted at the “Strengthening UI” session of NASI’s 23rd annual conference. The three speakers addressed a broad range of areas where the UI system could be improved and offered proposals that ranged from the very specific to new ways of conceiving of employment arrangements.

At NASI’s 2011 annual conference, the session “Should We Adopt the Social Security Recommendations of the Fiscal Commission Co-Chairs?” demonstrated the complexity of the Social Security reform debate.

Charles Blahous, a Social Security trustee, argued in favor of adopting the Fiscal Commission proposals, which he characterized as a “reasonable compromise” because it utilizes ideas from both sides of the aisle.

Andy Stern, a member of the Fiscal Commission, ultimately voted against the co-chairs’ proposal. He emphasized that while a crisis exists, it is of middle class retirement security in general – not Social Security – due to shrinking personal savings, fewer pension plans, and the erosion of family-wage jobs.

President Obama’s February 14th budget proposal for fiscal year 2012 would freeze or reduce funding for many federal programs as part of a strategy to begin reducing the federal deficit. The nation’s major social insurance programs – Social Security and Medicare – appear to have been exempt from such changes, at least for the moment.

The release of the President’s budget proposal is, of course, only the beginning of what will be a difficult and unpredictable negotiating process with a divided and contentious Congress. In the course of negotiations the pledges made this week by the President could be markedly altered, with potentially long-term consequences for the people who rely on these social insurance programs.

Social Security
Under the heading “Secure Social Security,” the President’s budget message states: